Which Credit Cards to Close?

[abowers]

The purpose of opening them was to use them -- but I have stopped using them to pay them all off. There are a couple of store cards there that I don't intend to use again because I don't buy things from those stores anymore.

Mortgage won't be for at least another 4 years.

[abowers]

FYI -- I checked my Experian credit score -- it's 703! That's up about 70 points from last year, when we got the new car. So drastically reducing my CC debt, no late payments increased my score despite taking out the car loan. I think that's a decent score anyway.

However, with my earliest credit card account being opened in July 2001, when I turned 18, the credit report still says:
Your report shows that the time since your oldest credit account or loan was opened is too short. Having credit accounts or loans open for a longer period of time has a positive impact on your credit score. (TS)

Anyway, I think I'm on the right track.

[The Budget Man]

The more I look at this thread, the more it concerns me the way people are so passionate about their credit score.

A friend once got stuck into me when I was talking about tax deductions and how great they were. He looked me in the eye and said... "If an investment is good and you want to make it better think of the tax deductions. If the investment is no good without a deduction don't do it."

Since then I've read different versions of the same advice.

I think the same advice can be applied to credit. If you need credit then you go for the best deal. You don't get credit or pay extra fees to keep credit just so you can borrow later. There will be enough needs to borrow to build your credit rating.

What do others think?

Enjoy Your Money
The Budget Man
www.PersonalityBudgeting.com
A budget in half the time

[ren]

I don't think I look at this the same way as you are, Budget Man. I think it's perfectly reasonable for many of us to be passionate about credit scores.

I am not the original poster, but I also have older accounts still open. It costs me nothing to keep them open (I do not buy anything on them that I wouldn't be buying otherwise) and closing them would hurt my credit score. Hurting my credit score could have an immediate impact on me in the form of increased car insurance rates and a long-term impact of causing me to have a higher interest rate on a mortgage when I buy a home.

Again, maintaining older accounts costs me nothing and allows me to get better deals. Why shouldn't I make an effort to keep a high score at no additional cost?

[abowers]

I wouldn't care about the credit score if it didn't have some bearing on my future ability to borrow and get low interest rates. I only became aware of it last year when we got the new car last year, and my credit score would have given me an interest rate 2 or 3% higher than what we did get with my fiance's credit score, with him co-signing.

[ren]

Aside from future borrowing, there's also insurance rates (higher for poor credit scores) and the fact that I'm in an industry where credit checks are part of the mandatory screening process prior to hiring.

My score impacts my life right now, so I'll worry about maintaining it right now. I won't pay extra, but I'll certainly do what I can to keep it up.

[JanH]

When we bought our last car, Hubby was called back and informed that my name had to be taken off the car application. The reason was: I had been putting DS's tuition on my credit card and I had used up most of my available credit. They couldn't get the good rate for the loan cos of me. But they could if I was off the application. That's when I became more aware of how the credit reports affected me.

[abowers]

Originally Posted by The Budget Man

You don't get credit or pay extra fees to keep credit just so you can borrow later. There will be enough needs to borrow to build your credit rating.

What do others think?

This may also be missing the point of what I've said earlier-- I'm not looking to OPEN further cards, I was wanting to close some to simplify things! And I'm also not paying any fees for any cards I have.

I am 23, and have had a cc since 18 for the inital purpose of establishing credit, and any credit report I've checked has told me my oldest acct hasn't been open long enough. So there's another reason for not waiting until you need credit to open something, in my case anyway.

[LuckyRobin]

I closed out all of my store credit cards (6) and 2 major credit cards when I was 24, and was still able to get a 5.5% mortgage four years later at 28. Sometimes I think this stuff get so overblown. The bank said it was what we did with our credit, as in used it responsibly within those 4 years, that mattered the most. We only had 2 credit cards, one Visa and one MC, during that 4 year period but we used them properly and had a credit rating of 803. At 24 it was 752. Did closing those accounts hurt me? I don't think so. If it did it recovered and improved my score in 4 years time. Just my own experience.

[abowers]

I'm thinking once I pay the balance down more on my 0% card I may close one or two of my lower limit store cards that I don't intend to use again that I haven't had open the longest. Fiancee just checked his credit score and it's 822! So apparently getting this car loan last year increased both of our credit scores about 70-80 points each. I guess we don't erally need to worry about what kind of interest rates we can get later with scores of 822 and 703.

[poundwise]

Originally Posted by The Budget Man

What do others think?

Some people are definitely too obsessed with their credit scores.

The arguments about insurance scoring and employment screening don't really hold water either. While it is true that a poor credit score can hurt you in more ways than one, you will not be turned down for a job with a score of 680 any more often than you would be with a score of 740. They are looking for people who have poorly managed their own finances including bankruptcies, judgments against, etc. In terms of insurance, each company has it own scale, but scoring is just that, graded on a scale. If you have a certain score (as I said, it varies) then you are considered "Excellent." Below that level, but above the next, you are "Good." And so on. If a range for excellent was 700-850, then a score of 700 is just as good as a score of 850.

Scales similar to my hypothetical suggestion are also prevalent in the lending industry.

It is highly suspect that any real-world net benefit is had from the obsessive pursuit of a ever-higher credit score. Especially if one factors in the time and energy given to it.

Certainly, there is merit is taking care of your credit and taking steps to improve your credit and score, however, I believe adopting some sound practices and then handling your finances properly and in a way that works for you and your family and your goals is a much better way of thinking. For many, a credit score has erroneously become a measuring stick of how well they are doing.